What did Eastman say to chemical industry analysts?

Hank Hayes • Feb 7, 2018 at 1:45 PM

Eastman Chemical Co. executives talked about their future financial expectations while the company also announced a stock repurchase of up to $2 billion during its “Innovation Day” presentation on Tuesday.

The event was held in New York City and attended by chemical industry analysts.

Last week, Eastman announced higher 2017 revenues and a return to earnings growth despite an Oct. 4, 2017 explosion in the coal gasification area and two hurricanes affecting company facilities in Texas and Florida.

“We have built a compelling, innovation-driven growth model that is unique to Eastman,” Mark Costa, board chair and CEO, said in a news release. “Our model consists of the combination of world-class technology platforms, relentless market engagement and differentiated application development. In particular, application development, which both accelerates and demonstrates the value of our innovation as well as improves understanding of the value of our products, is key to growth. In addition, aggressive portfolio management has improved the structural quality of the company’s earnings and cash flows. As a result, adjusted EBITDA (earnings before interest, tax, depreciation and amortization) has increased by over 90 percent from 2010 to 2017, with about half the improvement coming from organic growth and half coming from acquisitions, and this success is despite significant macro headwinds. And over the last three years, the company has generated close to $3 billion of free cash flow.

“Looking forward, we expect to leverage our innovation-driven growth model and strong cash generation to continue to deliver strong value creation. We expect revenue growth in our specialty products to be two times underlying markets, for our adjusted EBITDA margin to increase from the current 23 percent, to generate approximately $3.5 billion of free cash flow over the next three years, and for return on invested capital to be between 10 to 15 percent, which is significantly above cost of capital. We also expect the compound annual growth rate of our adjusted EPS (earnings per share) to be 8 to 12 percent over the next three years, which would be outstanding growth and a testament to the strength of our portfolio and our innovation.”

The company has increased its dividend for eight consecutive years and expects continued dividend increases as earnings grow.

Curt Espeland, executive vice president and chief financial officer, announced that Eastman’s board of directors has approved the repurchase of up to an additional $2 billion of Eastman common stock.

“This action taken by our board of directors further reinforces its confidence in our cash flow generation and its commitment to return value to stockholders,” Espeland said.

Share repurchases, according to Eastman, will be implemented through purchases made from time to time in either the open market or private transactions. The timing, volume, and nature of share repurchases will be at the discretion of management, depending on market conditions, applicable securities laws and other factors, and may be suspended or discontinued at any time.

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